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Econintersect: The inflation readings have been released for Japan for July. The CPI (Consumer Price Index) recorded a gain of 0.7% over the level for August 2012. This was the highest reading since late 2008. However, energy and energy dependent factors provided all of the gain; the core CPI, excluding food and energy, was -0.1%. This indicates contraction but was one of the smallest contractions in quite some time.

Follow up:

The July core CPI approaching zero may not follow through in August, however. The preliminary core CPI for August is -0.4% year-over-year, based on data from the Ku-area of Tokyo which has proven to be a good forward indicator for the entire country.

The following table was provided by the Japan Statistics Bureau:

Japan is struggling to end decades of deflation and move toward the governments inflation rate target of 2%. It would seem that some of the conditions are in place to produce positive inflation. Industrial production is expanding (up 1.6% on a year-over-year basis and up 3.2% over July) and employment is tight (3.8% unemployment).

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